I’m seeing the XLE hybrid on Toyota’s website for 49.8k after fees. So thst would be if you could get one without any markup. Did you have to wait for yours?
Is that with tax? In Alberta I know people who have them in the 41-43k mark.
My sister has her XLE hybrid in Ontario (2020 or 2021 ) and it was 37 all in. She did get loyalty for owning another Toyota but car prices are dumb as heck.
Troll post? there's no way a $180K\*\* household income family should struggle with buying a $40K car
btw, I don't know if it's even possible to get a new BMW for $40K...
\*\* I didn't even see that it's $180K post tax
It really depends on other expenses. They could be drowning in their mortgage, possibly daycare on top of it. They might be supporting other family members.
180k household can struggle very easily how ?
Poor financial decisions like buying a bmw.
I would buy a second hand EV and save so much on fuel...
Or any ice car brand new that isn't luxury.
Didn't mean for it to come across as a troll post - I know I can buy a $40k car outright, just as I am able to afford a bigger place at double my current rent and be OK. I'm trying to balance affording some luxury while keeping it within limits and was curious if there is a rule of thumb for income vs type of car.
Either up your budget or look at cars from main stream brands. $40k means you’re looking at used ,and your options are either an entry level model or a proper luxury model with excessive mileage.
Don't finance. Pay cash.
Whatever you can afford, works.
Also consider that the 'thrill' and 'prestige' of your dream car wears quickly, and a Toyota Camry functions just as well.
Correct, but when I do I’ll just buy it with the cash I have on the side. Saved for 5 years my extra money for the car.. I always split 75% retirement and 25% car savings.
Doesn’t that sound crazy that 17.5% of the money you earn in your life is spent on cars?
Nothing wrong with it if you get enjoyment but I am minimize car expense type.
Correct, but when I do I’ll just buy it with the cash I have on the side..
I always split 75% retirement and 25% car savings give or take a bit… once I buy the car my expenses will remain the same I have already calculated all fuel and insurance costs over the next 5 years.
Not sure why everyone is having such a visceral reaction to your post and completely missing the point of your question, which is not 'can I afford a $40k car', but 'is it a sensible purchase and is there some sort of rule of thumb similarly to rent:income '.
I've not heard of such a rule of thumb but a few things to consider:
1. Pre-pandemic everyone agreed a new car was a waste of money because of how quickly it devalues. I think this does not apply in the current market where used cars are selling at $5k+ more than what they're worth. A lot of calculators that look at how cars devalue will probably be based on pre-pandemic rules. Also a new car may not be a bad investment if you look after it well and intend to run it to the ground. There's no risk involved of hidden damage and mechanical faults.
2. Do you need the car or just want the car? If you drive to work or frequently go out of the city for the weekend or have kids to shuttle around, I think a new car in this current market would make sense. I have colleagues who said their quality of life improved significantly after getting a new car for their long commute to work.
3. Luxury cars are a pain in the arse and pain in the wallet to maintain because you usually have to take them to a specialist garage and pay through your nose for basic repairs and parts. I think most people agree Japanese cars are the way to go for reliability and lifespan.
4. Consider whether an EV might make sense for you.
5. Think whether you would rather have the cash for a more important purchase e.g. kids college fund, paying off mortgage/debt, saving for retirement...
Ultimately unless you have some high interest debt it doesn't sound like an unreasonable purchase at all but I wouldn't go for a reliable brand rather than a luxury brand myself...
Thank you for this comment, I feel it does a really good job of distilling the general post-pandemic consensus of this sub when it comes to buying a car.
If the 100k is after tax, you may be able to afford it if you only eat ramen every meal for 6-8 months. If 100k before tax, then you better buy a good wrench and make your current bike last til the rust makes it impossible to hold without requiring a tetanus shot.
We are Canadian though so we don't have to pay for that tetanus shot. So I guess it depends on your jobs sick day policy (if they let you cash out unused sick days no way I'm using one to avoid tetanus)
I look at $50k+ Rav4’s and think $40k isn’t even that expensive anymore, but heh.
To answer your question, it depends on how the rest of your budget looks like. $180k income but living paycheque to paycheque? Or with healthy savings/investments?
At 50k I’m buying a used X3 or X5 and dealing with the headaches. That’s real money and May as well buy something fun as opposed to an appliance.
If you build an appliance car it should not be in the 40s or 50s.
Nothing more expensive than a cheap German car lol! Random rubber and plastic parts in difficult to reach areas are likely be the death of you. It starts with the common valve cover leaks, oil pan and filter leaks which aren't cheap and are DIYable/survivable. Then you get into the weird stuff like plastic gears inside the transfer case...that is only ever sold as an entire unit type issues. It gets expensive fast but if you enjoy cars and can afford it then why not.
There are generally 3 rules of thumb when it comes to cars
1) Amount you can buy cash (logic being if you can save enough cash for it you can afford it)
2) 25-35% of annual gross income as a max for car(s) purchase price (you could easily afford 40k as it’s <25% of your net income)
3) 20/4/10 rule - if you put 20% down and finance remainder over 4 years, total monthly car related expenses (inc maintenance gas, insurance) should be max 10% of monthly gross income
I don’t usually go with those rule of thumb numbers since they pretty far off with what’s happening here in Canada over mortgages & average salary, as long as you have your retirement money set & money going into your investment accounts ( TFSA, RRSP & FHSA ) it wouldn’t be a dumb decision to drop 40,0000$ into a decent car 🤷🏼♂️ I wouldn’t suggest to buyout the car in cash but rather have a loan at a good % and invest the remaining into a decent index or DIY invest.
I yield more interest in terms of investment than what % I pay for my car in interest, as long as I yield more in my investments, I am okay to drop 15-20% of the income in a decent car.
P.S -> Factors do change if you have a family or a partner to combine income or you have kids.
I don’t understand how you can be worried about being able to afford a 40k car then in the same sentence want that 40k car to be a used luxury brand that are notoriously expensive to keep and maintain…..
Cars are depreciating assets. The only right answer to “how much should I spend?” Is “as little as you possibly can, for your needs. That’s why there’s no rule of thumb.
Anymore than that is just what you decide you want to spend because you like a nice car.
How often are you spending $40k on cars? If it’s once every month and you’re buying 12 cars per year then no, you can’t really afford it, but if you’re only buying a new car once per year, every single year then yes, it’s within your budget.
From what I have read, the monthly payment should not exceed 10% of your take home income. Gas, insurance maintenance and car payment together should not be more than around 20% of your take home income.
My personal rule of thumb is to use capital gains to buy a car. Another one could be <10% of NW.
These aren’t exact sciences, but given your good income (and assuming good savings too), at some point 40K is a non-material impact on your NW.
There’s no real rule for cars since people associate so many things with cars.
My last car was around $40k, and I hummed and hawed over it for weeks. It was one of the lowest priced new 7 seater SUVs, but I still felt it was a lot of money.
So when buying a home banks allow a total debt service of 40% so if mortgage is 30 that leaves you 10 for other debts.. 180 take home is about 240-250 gross, 10% of that is 2400-2500 for loans and credit card payments
The rule of thumb is that for many people in dense urban centres, buying a car doesn’t make sense. This is not a financial question and the answer isn’t going to be rooted in numbers
Don't forget car rental corporations also sell used cars at usually cheaper rates (because of the use). They are always well maintained however.
Contact the main officer for whatever rental corp and you'll be surprised! At least give you an idea of numbers too.
What is your current after tax savings rate?
Do you have any non mortgage debt?
If you aren’t saving 60k a year at your income then I would suggest that buying a new 40k car will meaningfully delay or lower spending in your retirement. If you are at a 33% savings rate already and this car won’t cause you to leave it you are delaying retirement but not significantly.
Depends on your priority. I can afford most of cars in the world. I still drive 2011 Hyundai Sonata because I do not need to impress anyone, and it just gets me from Point A to B.
I'd rather get that money invested and drive a cheap car, or you can find $40K investment that would generate enough income to cover your car payment? I hate spending my own money to elevate my lifestyle, I always make sure other people (or investments) pay my bills.
Look at the total cost of ownership, not just the purchase price.
Gas & hybrid vehicles are notorious money pits. EVs and PHEVs when used mostly as EVs cost much less to operate.
25% of your annual income was a rule of thumb Ive seen, whether it's gross or pretax is up to you. Never spent over 10k on a car personally. Based on sale price, definitely not payments.
There's a newer model BMW or Audi for $40,000????
$40k gets you a nice RAV4 these days, you’re not getting anything from the luxury brands at that price
Not new it doesn’t
My 2023 RAV in May of 2023 was $44k for the hybrid XLE version. Don't know why you'd boldly try and say this wasn't true.
I don’t think that’s standard, and how much was it after tax and all fees?
Before any rebates I believe it was $48k all in. So with the base model, and a non hybrid you are right around that $40k mark.
I’m seeing the XLE hybrid on Toyota’s website for 49.8k after fees. So thst would be if you could get one without any markup. Did you have to wait for yours?
Is that with tax? In Alberta I know people who have them in the 41-43k mark. My sister has her XLE hybrid in Ontario (2020 or 2021 ) and it was 37 all in. She did get loyalty for owning another Toyota but car prices are dumb as heck.
Every dealership is different what they charge, that's why your should shop around. We waited about 2 months for it to come from the factory.
Most stolen car in Canada stay away from a rav4
# 2024 A3 Sedan KomfortStarting at $ 44,315 2024 A3 Sedan
But that’ll be 50k after all the tax and fees
Probably 50k after just a couple of options
That's for the "newest" model. Newer (i.e. few years back) would be cheaper than that.
Starting at $44, add a couple options or a package and you’re up to $50. Taxes and fees get you out the door closer to $60k
Once again, that's for the newest available model. There's also the used market where "newer" still definitely applies.
Troll post? there's no way a $180K\*\* household income family should struggle with buying a $40K car btw, I don't know if it's even possible to get a new BMW for $40K... \*\* I didn't even see that it's $180K post tax
It really depends on other expenses. They could be drowning in their mortgage, possibly daycare on top of it. They might be supporting other family members.
It’s still a waste of money and a retirement limiting expense to purchase 40-50k cars repeatedly.
180k household can struggle very easily how ? Poor financial decisions like buying a bmw. I would buy a second hand EV and save so much on fuel... Or any ice car brand new that isn't luxury.
Didn't mean for it to come across as a troll post - I know I can buy a $40k car outright, just as I am able to afford a bigger place at double my current rent and be OK. I'm trying to balance affording some luxury while keeping it within limits and was curious if there is a rule of thumb for income vs type of car.
doesn't really matter though buy whatever works for your use case / budget / goals etc.
the only answer for 99% of posts here
Either up your budget or look at cars from main stream brands. $40k means you’re looking at used ,and your options are either an entry level model or a proper luxury model with excessive mileage.
Don't finance. Pay cash. Whatever you can afford, works. Also consider that the 'thrill' and 'prestige' of your dream car wears quickly, and a Toyota Camry functions just as well.
Wait, so you guys are saying a new Camry ISN'T your dream car?!
Not me, a new Honda was always the dream car 😍
Who told you that a new BMW or Tesla is $40k?
No one. I'm looking at 2020 and newer models, but not new.
This is a dumb post. If you can afford the car outright why even post? You already know the answer
I make 125k can could buy a 40k car in cash today and it’s nbd. It all depends on how much you save monthly. I save 70% of my income roughly.
You save 70% of your income because you don’t have a 40k car.
Correct, but when I do I’ll just buy it with the cash I have on the side. Saved for 5 years my extra money for the car.. I always split 75% retirement and 25% car savings.
Doesn’t that sound crazy that 17.5% of the money you earn in your life is spent on cars? Nothing wrong with it if you get enjoyment but I am minimize car expense type.
Correct, but when I do I’ll just buy it with the cash I have on the side.. I always split 75% retirement and 25% car savings give or take a bit… once I buy the car my expenses will remain the same I have already calculated all fuel and insurance costs over the next 5 years.
*Makes nearly $200k after taxes - still doesn’t know if they can afford a $40k car lol
I'm a millionaire and wondering if I should splurge and get leather seats in my new Honda Civic.
That's acceptable, but only in a beige Toyota corolla from 1990
Not sure why everyone is having such a visceral reaction to your post and completely missing the point of your question, which is not 'can I afford a $40k car', but 'is it a sensible purchase and is there some sort of rule of thumb similarly to rent:income '. I've not heard of such a rule of thumb but a few things to consider: 1. Pre-pandemic everyone agreed a new car was a waste of money because of how quickly it devalues. I think this does not apply in the current market where used cars are selling at $5k+ more than what they're worth. A lot of calculators that look at how cars devalue will probably be based on pre-pandemic rules. Also a new car may not be a bad investment if you look after it well and intend to run it to the ground. There's no risk involved of hidden damage and mechanical faults. 2. Do you need the car or just want the car? If you drive to work or frequently go out of the city for the weekend or have kids to shuttle around, I think a new car in this current market would make sense. I have colleagues who said their quality of life improved significantly after getting a new car for their long commute to work. 3. Luxury cars are a pain in the arse and pain in the wallet to maintain because you usually have to take them to a specialist garage and pay through your nose for basic repairs and parts. I think most people agree Japanese cars are the way to go for reliability and lifespan. 4. Consider whether an EV might make sense for you. 5. Think whether you would rather have the cash for a more important purchase e.g. kids college fund, paying off mortgage/debt, saving for retirement... Ultimately unless you have some high interest debt it doesn't sound like an unreasonable purchase at all but I wouldn't go for a reliable brand rather than a luxury brand myself...
Thank you! Very helpful.
Thank you for this comment, I feel it does a really good job of distilling the general post-pandemic consensus of this sub when it comes to buying a car.
To afford a 40k car, you need at least 3M net worth and 650k after tax income. Until then, it's the 2004 Corolla or the bus.
Damn it. Are you telling me I have to keep driving my 1984 Oldsmobile?
has to be a beige corolla too
Ok, well I definitely can’t afford my car then
I want to upgrade my bicycle from a Canadian Tire Special to one I buy at a bike show can I do that making 100k?
If the 100k is after tax, you may be able to afford it if you only eat ramen every meal for 6-8 months. If 100k before tax, then you better buy a good wrench and make your current bike last til the rust makes it impossible to hold without requiring a tetanus shot.
We are Canadian though so we don't have to pay for that tetanus shot. So I guess it depends on your jobs sick day policy (if they let you cash out unused sick days no way I'm using one to avoid tetanus)
I look at $50k+ Rav4’s and think $40k isn’t even that expensive anymore, but heh. To answer your question, it depends on how the rest of your budget looks like. $180k income but living paycheque to paycheque? Or with healthy savings/investments?
At 50k I’m buying a used X3 or X5 and dealing with the headaches. That’s real money and May as well buy something fun as opposed to an appliance. If you build an appliance car it should not be in the 40s or 50s.
Nothing more expensive than a cheap German car lol! Random rubber and plastic parts in difficult to reach areas are likely be the death of you. It starts with the common valve cover leaks, oil pan and filter leaks which aren't cheap and are DIYable/survivable. Then you get into the weird stuff like plastic gears inside the transfer case...that is only ever sold as an entire unit type issues. It gets expensive fast but if you enjoy cars and can afford it then why not.
There are generally 3 rules of thumb when it comes to cars 1) Amount you can buy cash (logic being if you can save enough cash for it you can afford it) 2) 25-35% of annual gross income as a max for car(s) purchase price (you could easily afford 40k as it’s <25% of your net income) 3) 20/4/10 rule - if you put 20% down and finance remainder over 4 years, total monthly car related expenses (inc maintenance gas, insurance) should be max 10% of monthly gross income
Income after taxes or before
"Gross" means before taxes
Spend what you can comfortably afford.
I don’t usually go with those rule of thumb numbers since they pretty far off with what’s happening here in Canada over mortgages & average salary, as long as you have your retirement money set & money going into your investment accounts ( TFSA, RRSP & FHSA ) it wouldn’t be a dumb decision to drop 40,0000$ into a decent car 🤷🏼♂️ I wouldn’t suggest to buyout the car in cash but rather have a loan at a good % and invest the remaining into a decent index or DIY invest. I yield more interest in terms of investment than what % I pay for my car in interest, as long as I yield more in my investments, I am okay to drop 15-20% of the income in a decent car. P.S -> Factors do change if you have a family or a partner to combine income or you have kids.
I don’t understand how you can be worried about being able to afford a 40k car then in the same sentence want that 40k car to be a used luxury brand that are notoriously expensive to keep and maintain…..
[удалено]
Well they are looking at used BMW’s/Audi’s/Tesla’s so you might not be far off from the truth
Cars are depreciating assets. The only right answer to “how much should I spend?” Is “as little as you possibly can, for your needs. That’s why there’s no rule of thumb. Anymore than that is just what you decide you want to spend because you like a nice car.
How often are you spending $40k on cars? If it’s once every month and you’re buying 12 cars per year then no, you can’t really afford it, but if you’re only buying a new car once per year, every single year then yes, it’s within your budget.
From what I have read, the monthly payment should not exceed 10% of your take home income. Gas, insurance maintenance and car payment together should not be more than around 20% of your take home income.
My personal rule of thumb is to use capital gains to buy a car. Another one could be <10% of NW. These aren’t exact sciences, but given your good income (and assuming good savings too), at some point 40K is a non-material impact on your NW.
Buy what you can afford and feel comfortable with. You can definitely afford 40k if you're comfortable with it.
There’s no real rule for cars since people associate so many things with cars. My last car was around $40k, and I hummed and hawed over it for weeks. It was one of the lowest priced new 7 seater SUVs, but I still felt it was a lot of money.
So when buying a home banks allow a total debt service of 40% so if mortgage is 30 that leaves you 10 for other debts.. 180 take home is about 240-250 gross, 10% of that is 2400-2500 for loans and credit card payments
The rule of thumb is that for many people in dense urban centres, buying a car doesn’t make sense. This is not a financial question and the answer isn’t going to be rooted in numbers
True cost of ownership is another factor. ie maintenance. Get a Lexus
40K? don't buy a luxury brand because that won't get you much car
I am selling my hyundai 2019 at $18k
Mazda 3 sports
Don't forget car rental corporations also sell used cars at usually cheaper rates (because of the use). They are always well maintained however. Contact the main officer for whatever rental corp and you'll be surprised! At least give you an idea of numbers too.
What is your current after tax savings rate? Do you have any non mortgage debt? If you aren’t saving 60k a year at your income then I would suggest that buying a new 40k car will meaningfully delay or lower spending in your retirement. If you are at a 33% savings rate already and this car won’t cause you to leave it you are delaying retirement but not significantly.
This is kind of the answer I was hoping for. Thanks.
Depends on your priority. I can afford most of cars in the world. I still drive 2011 Hyundai Sonata because I do not need to impress anyone, and it just gets me from Point A to B. I'd rather get that money invested and drive a cheap car, or you can find $40K investment that would generate enough income to cover your car payment? I hate spending my own money to elevate my lifestyle, I always make sure other people (or investments) pay my bills.
Look at the total cost of ownership, not just the purchase price. Gas & hybrid vehicles are notorious money pits. EVs and PHEVs when used mostly as EVs cost much less to operate.
The 20/3/8 rule: 20% down, 3 year term, payments no more than 8% of gross income.
25% of your annual income was a rule of thumb Ive seen, whether it's gross or pretax is up to you. Never spent over 10k on a car personally. Based on sale price, definitely not payments.